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March 27th, 2009

Why Tesla Motors Deserves Their Loan

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Tesla Motors says all systems are go on unveiling their all-electric, “Model S” sedan by mid-2011. All except a $450 million (not billion) loan by the federal government. Referred to as “Silicon Valley’s solution to the nation’s energy problem,” Tesla says the Big Three’s inability to develop an all-electric vehicle spurred their motivation to try and become the first.

Taking into account Washington’s financial commitment to GM, Ford, and Chrysler, it seems only logical that the government would lend another American car company the money, especially since Tesla’s latest vehicle corresponds directly with the new administration’s agenda to increase the development of “greener” vehicles. Also, when’s the last time a company or institution approached the U.S. government for a loan under $500 million?

The Model S, which Tesla says would be the first mass-manufactured all-electric car, will cost $57,400, or $49,900 after tax credits. [Elon Musk, the company’s chief executive] said that, when gas savings are taken into account, buying a Model S will be comparable to buying a $35,000 Ford sedan. “Would you rather have this car or a Ford Taurus?” he asked, pointing to the sporty silver prototype.

Further proof that Tesla Motors deserves this loan is how the Model S stacks up against the competition — General Motor’s electric vehicle called the “Volt.” While Tesla claims the Model S can get 300 miles on a single battery charge, the Volt’s target range is only 40 miles on electrical power:

”Forty miles might be a sweet spot for making sure a lot of people get to work without using gasoline, but you’re doing it at a cost that will never be repaid in fuel savings,” Jeremy Michalek, an engineering professor who led the study, said.

An extremely small automaker with significant consumer demand, Tesla Motors has only one other model — a $109,000 Roadster sports car with 1,000 people on a waiting list.

Readers: In your opinion, does Tesla Motors deserve the $450 million loan?

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8 Responses to “Why Tesla Motors Deserves Their Loan”

  1. Scott Monty Says: March 28th, 2009 at 11:25 am

    Quick correction: Ford has received no financial help from the U.S. government. Our statement on that can be found at: http://media.ford.com/article_display.cfm?article_id=29604

    Scott Monty
    Global Digital Communications
    Ford Motor Company

  2. Tim Manni Says: March 30th, 2009 at 12:58 pm

    Scott,

    The blog article doesn’t state that Ford received any cash, it mentions the U.S.’s “financial commitment” to Ford: “Taking into account Washington’s financial commitment to GM, Ford, and Chrysler…” The automaker requested a $9 billion line of credit that they said they would use only if they needed it (from your statement):

    Ford is asking for access to a line of credit of up to $9 billion in bridge financing, but reiterated that it hopes to complete its transformation without accessing a government loan.

    “For Ford, a line of credit would serve only as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company,” Mulally said.”

    Despite the fact that Ford hasn’t needed to access the line of credit, the U.S. still expressed a willingness to commit Ford the funds if they needed it. It comes down to the U.S.’s commitment, not Ford’s acceptance.

    Thanks for your comment,
    Tim

  3. matt @ Thrive Says: March 30th, 2009 at 3:49 pm

    I have to applaud this post, particularly because we know that money often has diminishing marginal returns. Even if Tesla goes out of business, they will have done a huge amount of promoting the visibility and potential superiority of all-electric vehicles. When have the big three done the same? Regardless of whether Ford is taking money, they have let down on the promise that large industries do need to make to the people that they employ and who consume their goods: we will do better, always better, for you.

    Tesla is doing that: Scott, can you say the same?

  4. Tim Manni Says: March 31st, 2009 at 10:50 am

    Thanks Matt I appreciate that. We have to salute a company that’s willing to do things other aren’t, or aren’t doing as fast. It’s no wonder why the Big Three are in dire straits…To the outside world it seems that they’ve been slow to develop these types of vehicles and do so effectively. You mean to tell a company like GM, who has received billions (outside their latest bailouts) to develop alternative vehicles, could only come up with an electric car that can go 40 miles on a single charge…that’s nothing compared to Tesla’s technology.

    Tesla deserves this money, and I hope they get it!

    Good to hear from you again,
    Tim

  5. Tesla Motors CEO Calls Writer "A Huge Douchebag" | Blippitt Says: April 11th, 2009 at 1:01 am

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  6. B L. Saulsberry Says: August 20th, 2009 at 8:44 pm

    Honestly, it would be better for all of us if business depended on the open market and not government to fund their venture. Government takes the zest out of capitalism. Additionally, its not like the citizens of the US took a vote on this matter. Allow for investors to recieve the proper risk/reward for investing. So, thumbs down to Tesla receiving a LOI from the US Government.

  7. Tim Manni Says: August 21st, 2009 at 11:21 am

    B.L.,

    Thanks for commenting. If you say “thumbs down to Tesla,” do you also say ‘thumbs down to GM and Chrysler’? I really struggle with giving two failing companies billions and not giving anything to a small, up and coming American Biz.

    Hope to hear from you soon,
    Tim

  8. NYSUSAN Says: April 4th, 2013 at 4:05 pm

    Is this a credible product? Tesla Motors is under Fed investigation for bribery & corruption; Musk stole
    the company from Martin the founder; Tesla has been sued many, many times for misdeeds; Tesla took
    taxpayer $$ yet hired off-shore workers and fired NUMMI union workers; Their batteries blow up when they
    get wet or overcharge; They owe more $ than they can ever pay back. The Leaf does the same thing for
    $100k less. The billionaire owner got free tax money without earning it; Goldman, K&L Gates, KPCB & their

    investors put in fake car orders and fake stock buys to pump the stock; They lied to San Jose, Downey,
    New Mexico and many cities about building a factory in each; The CEO cheated on his wife & business
    partners; The CEO hires magazines to write glory-stories about him; Telsa has 30 Indian bloggers hired to

    write fake user postings; The EMF from the car is measured to cause biological damage; They changed the
    prices on customers after they ordered; They never get their costs right; each car coming off the line
    has problems according to Musk himself; Selling 4K cars after a decade is a pathetically small # for such

    a run-of-the-mill electric car; They announce they “intend” to pay the loan back early, yet do not
    actually pay it back even though the owner has a billion dollars; Former staff have accused the CEO of
    everything from spying to harassment; The public calls the car the “Solyndra-Mobile” and say it is an
    “Un-American Product”; It is made, and priced, by and for Stanford elitist yuppie rich boys; The same six
    writers that support Tesla has been shown to be paid shills; All of this is well documented. Wouldn’t

    anyone would be ashamed to drive a Tesla?

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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